Debt consolidation is the process of taking out a single personal loan that covers all your existing debts, paying off each one and then making payments on the new, consolidated loan for a set amount of time (usually 12 to 60 months). You may also be able to combine debt through a credit card balance transfer, a home equity loan or borrowing from your 401(k) savings. Depending on your credit, you may be able to get a debt consolidation loan with an interest rate that’s lower than the rates on your current debt, which can help reduce your monthly payments.More info:https://alpinecredits.ca/loans/consolidation
The Power of One: Simplifying Your Finances with a Consolidation Loan
However, there are a few things to keep in mind before you apply for a debt consolidation loan. First, if you have bad credit (629 credit score or below), it’s unlikely that you’ll qualify for a debt consolidation loan with a lower interest rate than your credit cards. Plus, if you miss a payment on your debt consolidation loan, the lender will report this to the credit bureaus, which can hurt your credit score more than missing a credit card payment would.
Additionally, a debt consolidation loan can lead to more debt if you end up extending your repayment term. To avoid this, make sure that your repayment plan is a shorter duration than the total term of your existing credit card debt and that you can comfortably afford to pay off your new loan on its initial timeline.